What to look for in a financial planner

October 31, 2018

Unlike in healthcare where every certification and qualification is earned, anyone can call themselves a financial planner.

Unlike in healthcare where every certification and qualification is earned, anyone can call themselves a financial planner. There are no certifications, exams, registrations, or coursework required. That means there are a lot of unqualified planners out there. Here’s how to avoid them and find one that will be right for you:

Hire a Certified Financial Planner.

To earn the CFP designation, a planner must pass a test administered by the Certified Financial Planner Board of Standards and commit to continuing education on financial matters and ethics. A CFP is the financial equivalent to a primary care doctor, dealing with the client’s overall financial health. Another important designation is Registered Investment Advisor (RIA). It means the adviser is registered with the Securities and Exchange Commission (SEC) and provides investment advice for a fee.

Make sure the planner is a fiduciary.

Here’s another area in which healthcare and financial planning differ significantly: A planner is not obligated to give you the advice most beneficial for you. Many planners earn money from selling investments and other financial products and it is perfectly legal for them to sell something that is not optimal for a client, but that earns them a commission. Their standard is “suitability,” meaning an investment should be appropriate, but doesn’t have to be the best or conflict-free. By contrast, a fiduciary is legally obligated to act in the client’s best interest at all times. Beginning Oct. 1, 2019, all CFPs must adopt the fiduciary standard.

Understand how the planner is paid.

Planners earn their money either from commissions or by charging hourly or flat fees. A commission is a fee paid when a financial product is bought or sold, and this can create an incentive for planners to push unnecessary sales and purchases. Other planners charge a fee for advice. This can be a flat fee for a specific task, such as developing a financial plan, or an annual fee, such as 1 percent of all assets under management. The fee-only system is a better way to receive unbiased advice.

Hire a planner who works with other doctors.

The planner doesn’t have to work solely with healthcare providers, but they should be experienced in the issues physicians face, such as student loan debt, says Joel Greenwald, MD, CFP, owner of Greenwald Wealth Management in St. Louis Park, Minn.

Run a background check.

Ask if the planner has ever been convicted of a crime or been investigated by a regulatory body or industry group. The Financial Industry Regulatory Authority has a page that explains each adviser professional designation and links to the organizations that issued the designation. Clients can check for complaints on the organization pages. The SEC also has a site which allows clients to check the credentials and disciplinary record of advisers. Ask for references of current clients with goals and finances similar to yours. Check to make sure credentials are current.

Ask around.

Consult with colleagues to find out if they are happy with their planners. Look for those in financial situations similar to your own (children, career stage, etc.) 

Beware of boasts.

Avoid planners who claim they always beat the market or who promise extraordinary returns. They’re either exaggerating, or worse, likely to take unwelcome risks.
Sources: The National Association of Personal Financial Advisors represents fee-only fiduciary advisors. Members of the Garrett Planning Network are CFPs available for smaller projects for an hourly fee.

download issueDownload Issue : November 10, 2018 edition